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Business Planning ActivitiesBusiness Planning Activities
Individual Point of ViewIndividual Point of View Business Point of ViewBusiness Point of View
– PlanningPlanning
– BudgetingBudgeting
Accounting Information SystemAccounting Information System
Resources and procedures in a Resources and procedures in a businessbusiness
Accounting Information SystemAccounting Information System
Resources and procedures in a Resources and procedures in a business that change economic business that change economic
datadata
Accounting Information SystemAccounting Information System
Resources and procedures in a Resources and procedures in a business that change economic business that change economic data into financial informationdata into financial information
Users of Accounting Users of Accounting InformationInformation
OwnersOwners LendersLenders Labor OrganizationsLabor Organizations CustomersCustomers Society groupsSociety groups Government Regulatory AgenciesGovernment Regulatory Agencies
Entity ConceptEntity Concept
Any organization unit for which we Any organization unit for which we gather and processgather and process
Entity ConceptEntity Concept
Any organization unit for which we Any organization unit for which we gather and process financial and gather and process financial and
economic dataeconomic data
Entity ConceptEntity Concept
Any organization unit for which we Any organization unit for which we gather and process financial and gather and process financial and economic data for the purpose of economic data for the purpose of
decision makingdecision making
Types of OwnershipTypes of Ownership
Single proprietorshipSingle proprietorship PartnershipPartnership CorporationCorporation
Financial StatementsFinancial Statements
Balance SheetBalance Sheet Income StatementIncome Statement Statement of Cash FlowsStatement of Cash Flows
Balance SheetBalance Sheet
Summarizes assets, liabilities, and Summarizes assets, liabilities, and owners’ equities as of a specific moment owners’ equities as of a specific moment in timein time– Assets - economic resources or items of Assets - economic resources or items of
value a business ownsvalue a business owns
– Liabilities - claims against the assets by Liabilities - claims against the assets by nonownersnonowners
– Owners’ equity - claims against the assets by Owners’ equity - claims against the assets by ownersowners
Basic Accounting EquationBasic Accounting Equation
Assets = Liabilities + Owners’ EquityAssets = Liabilities + Owners’ Equity
Income StatementIncome Statement
Presents the results of operations Presents the results of operations for a period of timefor a period of time– Revenues - inflow of assets from Revenues - inflow of assets from
performing services or selling goodsperforming services or selling goods
– Expenses - use of assets or Expenses - use of assets or incurrence of liabilities when earning incurrence of liabilities when earning revenuesrevenues
Statement of Cash FlowsStatement of Cash Flows
Presents the reasons why cash on Presents the reasons why cash on the balance sheet changed from the balance sheet changed from one date to anotherone date to another
Presents cash flows fromPresents cash flows from– Operating activitiesOperating activities
– Investing activitiesInvesting activities
– Financing activitiesFinancing activities
Published Annual ReportsPublished Annual Reports
Letter to stockholdersLetter to stockholders Management’s discussion and Management’s discussion and
analysisanalysis Financial statements and notesFinancial statements and notes The report of the independent The report of the independent
accountantaccountant
Analyzing InformationAnalyzing Information
Common-size statementCommon-size statement– Express each item as a percent of the Express each item as a percent of the
total for that statementtotal for that statement
»Balance sheet - total assetsBalance sheet - total assets
»Income statement - total revenuesIncome statement - total revenues
Balance Sheet AnalysisBalance Sheet Analysis
Are total assets higher or lower?Are total assets higher or lower? What is percent change in total What is percent change in total
assets?assets? Is the percent of total liabilities to Is the percent of total liabilities to
total liabilities plus owner’s equity total liabilities plus owner’s equity increasing or decreasing?increasing or decreasing?
Income Statement AnalysisIncome Statement Analysis
Are revenues higher or lower?Are revenues higher or lower? What is the precentage change in What is the precentage change in
total revenues?total revenues? Is the percentage of total expenses Is the percentage of total expenses
to total revenues increasing or to total revenues increasing or decreasing?decreasing?
Integrative AnalysisIntegrative Analysis
Is the business operating efficiently by Is the business operating efficiently by using the least amount of asset using the least amount of asset investment to generate a given level of investment to generate a given level of total revenues?total revenues?
Calculate Total Asset TurnoverCalculate Total Asset Turnover– Total revenuesTotal revenues
– divided bydivided by
– Average total assetsAverage total assets